Chart of the Day: This Key Bank ETF Just Plunged Below Important Levels Tuesday

A combination of interest rates backing up and fears of over-exposure to troubled Italy continued to weigh on top financial stocks on Tuesday. Morgan Stanley (MS) dropped 5.74%, the day's largest loss among financial stocks and the second biggest loser among the S&P 500 . JPMorgan Chase (JPM) fell 4.20%, Goldman Sachs (GS) declined 3.4%, Citigroup (C) lost 4% and Bank of America (BAC) slipped by 3.6%.

In hindsight, investors should have expected some form of pullback in the financials: the XLF has failed twice to break through the 100-day moving average over the past 30 days despite a broader market rally.

Bank stocks continue to be under pressure. Source: Bloomberg

"The market hates uncertainty -- these are all events that inspire uncertainty and you are not going to rally on uncertainty as much as it might made sense to do so," said TheStreet's founder Jim Cramer in his latest Real Money column.

Cramer then offered up a great reason why banks stocks could soon be approaching buy points.

"How about the issues with the European banks? Don't we have to worry about the Italian banks, or the Germans? Again there is that uncertainty element. But I can assure you that the Italian government in conjunction with the EU central bank will save Unicredit, really the only major European bank. Germany is a total club and the club has too many members to let Deutsche Bank (DB) fail. However, the more likely scenario is that our banks pick up more European business. This is already happening in New York where JPMorgan has been a beneficiary of Deutsche Bank's departure from key business lines here. It's all good news. And U.S. companies that may be tempted to issue bonds overseas where the rates are lower, and the issuance has better tax status, will go to U.S. banks to handle the foreign deals. Terrific business.

Now, it gets even better. The truth is that our banks had to recapitalize a long time ago and are flush with capital. No other country insisted on forcing capital raises on their banks, especially Europe. So the only contagion will be European money out of their countries and into our banks."